Investors now looking beyond political risk
The Netherlands, France, Germany and possibly Italy had all scheduled to go to the polls this year. The rise of populist, anti-European parties in these countries has amplified political risk, altering the traditional political focus for markets, from fiscal prudence to populism and the viability of the whole European project.
Polling data had become an unreliable tool for investors. Markets reacted instantly to the first round result of the French election. A relief rally in equities and peripheral bonds was coupled with the selling of safe-haven, German debt. The concerns over the UK election, Brexit negotiations and Donald’s Trump unpredictable policies are now being passed over, with investors starting to focus on the timing for Europe’s first interest rate hike.
